Tether USDt USDT
Tether or US Dollar Tether (USDT) is a cryptocurrency that has it’s value tied (or tethered) to the value of the US Dollar. Known as a Stablecoin this crypto token is issued by the Hong Kong based company Tether. Tether accounts for roughly 80% of all Stablecoin volume, and besides BTC accounts for the majority of exchange traded pairs. Though established with high volume, Tether is not without controversy and critics.
In 2014, entrepreneurs Brock Pierce, Reeve Collins and Craig Sellars launched what is today known as USDT. Back then, it was known as RealCoin and was one of the first crypto coins to try and address the issue of cryptocurrency volatility which was a barrier to usage and adoption. USDT offers a more stable and familiar asset to be used within the crypto ecosystem.
The coin achieves this Tether, or link, with the US Dollar by ensuring that the supply of USDT is matched by the reserves held by Tether. Thus Tether claims that any one USDT can be swapped for any one US Dollar and therefore the value remains at 1:1 parity.
Doubts have been raised as to whether this is true. Concerns emerged in 2019 when documents submitted to the New York Attorney General's office, for a case of whether its affiliated exchange, Bitfinex, covered up the loss of nearly $1 billion in customer funds using Tether’s reserves. Filings suggested that only 74% of Tether's assets were held in the form of cash and cash equivalents, the other 26% being a loan to help out Bitfinex.
That case has since been settled with an $18million fine and an agreement to provide transparent reporting to the NYAG over a two year period. At the same time Tether has published attestations - the first in March 2021 - verifying that had at least $35.28 billion in total assets against total liabilities of $35.15 million.
An attestation doesn't hold the same value, in terms of transparency, as an audit, but it was conducted by accountants in the Cayman Islands, Moore Cayman, and will be produced regularly, along with the submissions the NYAG.
The most recent report released in May showed that 49% of Tether tokens are back by unspecified commercial paper - in other words corporate debt, which isn't a liquid (easily sellable) collateral, like the actual US dollar.
This doubt has been enough to cause significant price drops in USDT such as the fall to $0.88 in 2018. Drops in prices such as these completely negate the value proposition of USDT but the settling of NYAG case and commitment to attestations should go a long way to answering the common criticism that Tether isn’t backed by equivalent real dollars..
Ultimately, the utility of USDT and the amount of people that now hold it/use it on a regular basis has meant that it has become a key tool within the crypto industry.
Tether makes money by charging a deposit fee of 0.1%
Who is using Tether?
Tether or USDT is an extremely popular financial tool within crypto. All around the world Tether is consistently chosen as the most popular stablecoin to trade with. This is particularly true in Asia where - according to Chainalysis - Tether makes up 93% of all stablecoin trading.
Google trends shows that interest has absolutely boomed over the last year (last half of 2020 and first half of 2021) likely linked to the rise of DEFI which is so relevant on stablecoin usage.
We can see a slight peak in 2017 during the ICO craze but this is dwarfed by the most recent peak that is showing no signs of dropping. This suggests that this current crypto boom has brought a more longer term interest with people learning about USDT and its usefulness in trading.
Furthermore, Google Trends also shows that interest in USDT is particularly global, with much of North Africa, the Middle East and Asia showing strong levels of interest. This makes sense as many users see USDT as a cost-efficient and straightforward way to hold what are effectively US dollars without having to go through the fiat system. If you don’t live in the West and don’t have ease of access to said fiat systems then USDT can be a great way to get that access.
What is the size of the Tether network?
As of May 2021, there are just over 54 billion USDT tokens circulating - this obviously equates to around $54 billion worth of collateral. Tether claims that these tokens are backed by their US Dollar reserves that equate to just slightly more than the circulating tokens.
In terms of distribution it is estimated that just 104 key wallets hold nearly 70% of Tether. Though this might suggest the network has a very unequal distribution, it is likely that most of these addresses belong to exchanges or custody services.
In just one week of January 2021 alone, Tether minted a record $2 billion worth of USDT. The company is adamant that this is fully backed, and their popularity seems to confirm that people believe them. Recently, Tether surpassed BTC in terms of trading volume making it the most traded crypto coin of all time.
What is the size of the Tether community?
Tether the company is estimated to only have around 20 employees making it a relatively small crypto project compared to the likes of Ethereum or Polkadot. The official twitter account has around 100,000 followers with the official reddit page having just over 7 thousand members.
This is likely due to the fact that USDT is very much focused on a narrow and clear use case, absent any price speculation that leads to tribalism.
How much Tether is traded?
Whilst these community numbers may seem small, the numbers that really show the significance of Tether are the trading volume numbers. As previously mentioned, USDT recently passed BTC in terms of trading volume making it the number one traded cryptocurrency of all time.
As of May 2021, Tether has a staggering average daily trading volume of over $231 billion. The current market cap for USDT is $54 billion and the coin is currently ranked #6. With Coinbase recently deciding to offer USDT all three main crypto trading platforms offer the ability to trade USDT.
Binance is currently the biggest platform with USDT/BTC, USDT/ETC and USDT/DOGE being the most popular trading pairs.